Offshore Yuan Falls as PBoC Maintains Weak Fixing

The offshore yuan weakened to around 6.83 per dollar on Thursday, extending its losing streak to a third consecutive session and hitting its lowest level in more than a week, as demand for the safe-haven US dollar strengthened amid persistent geopolitical uncertainty. Sentiment remained fragile against the backdrop of heightened tensions in the Middle East, as Iran seized two vessels in the Strait of Hormuz on Wednesday, while the US continues to enforce a blockade on ships linked to Iranian ports. Additional pressure on the yuan came from the central bank, which has consistently fixed the currency between 300 and 500 pips weaker than market projections for much of the month. The PBoC set the daily midpoint at 6.8650 per dollar, 356 pips weaker than a Reuters estimate. Attention also turns to the upcoming April 27–30 National People’s Congress Standing Committee session, where lawmakers are expected to review proposed amendments to the Prison Law, along with other legislative measures.

The offshore yuan edged higher to above 6.81 per USD, hitting its highest in more than three years as stronger-than-expected growth in China’s economy boosted sentiment. The world’s second-largest economy grew 0.5% in the first quarter from a year ago, accelerating from the 4.5% gain in the prior quarter and beating forecasts. However, signs of weakness started to emerge as the war in Iran disrupted global supply chains. March activity data showed a mixed backdrop, with industrial output rising 5.7% but slowing from earlier in the year, while retail sales increased 1.7%, missing expectations and easing from the previous period. This followed recent trade data, which highlighted a severe cooling in China’s export growth, indicating that the ongoing Middle East war may be dragging down global demand. Meantime, the US and Iran are considering extending their two-week ceasefire to allow more time for talks, even as the Strait of Hormuz remains effectively closed under a dual blockade.

The offshore yuan weakened to around 6.81 per dollar on Wednesday, ending an eight-session winning streak and pulling back from a near three-year high as market sentiment turned subdued amid weaker-than-expected trade figures. China’s exports slowed to a five-month low, rising only 2.5% year-on-year to USD 321.03 billion, indicating softer demand for yuan to settle Chinese trade transactions. Meanwhile, imports surged 27.8% to USD 269.90 billion, marking the fastest pace of growth since November 2021. Despite the mixed trade picture, the Chinese economy is expected to grow by 4.8% year-on-year in the first quarter of 2026 despite the ongoing Middle East war, marking a modest rebound from 4.5% in the fourth quarter of 2025, which was the slowest pace since the post-pandemic reopening in 2022. The prolonged Middle East conflict has had only a limited impact on China, supported by years of efforts to strengthen energy security and reduce exposure to external shocks.